People's Sav. Bank of Blakesburg v. Smith
Decision Date | 14 April 1930 |
Docket Number | No. 39568.,39568. |
Citation | 210 Iowa 136,230 N.W. 565 |
Parties | PEOPLE'S SAV. BANK OF BLAKESBURG v. SMITH. |
Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Wapello County; R. W. Smith, Judge.
Action on two promissory notes. The defenses were want of consideration and fraud in the inception of the instruments. The plaintiff alleged that it is a holder in due course. Trial to the court and a jury. Verdict and judgment thereon for the plaintiff, for the full amount due on the notes according to their terms. The defendant appeals.
Affirmed.Roberts & Roberts and L. L. Duke, all of Ottumwa, for appellant.
Heindel & Hunt, of Ottumwa, for appellee.
On August 11, 1919, the appellant, Smith, executed and delivered to one, P. P. O'Connor, an agent of the Associated Packing Company, his promissory note for $625. Three days later, he executed and delivered unto said agent a second promissory note for $400; said notes became due six months after their respective dates. They were what may be termed “myself notes” and were indorsed in blank by the appellant. These instruments were executed as a part of the purchase price of stock in the Associated Packing Company, a corporation. On August 14, 1919, the aforesaid two notes of the appellant, and two other notes of $250 each, were sold and transferred to the appellee bank, and as a part of the same transaction, the appellee bank executed and delivered unto O'Connor its certificate of deposit, in the amount of $1,525. This certificate of deposit provides as follows: “The Associated Packing Company has deposited in this bank $1525, payable to the order of themselves in current funds on return of this certificate properly indorsed, six months after date, with interest at the rate of 4 per cent per annum until due.”
It is undisputed that this certificate of deposit was duly negotiated by the Associated Packing Company before maturity, when, in its course through commercial channels, it reached the Bankers' Trust Company of Des Moines under indorsements, and the same was paid by the appellee bank to the Bankers' Trust Company on February 16, 1920.
Plaintiff's cause of action is founded upon the aforesaid two notes. The defendant pleads want of consideration for the notes, and fraud in their inception. The appellee pleads the facts, upon which it contends that it is a holder in due course.
At the trial, the defendant offered some testimony tending to show acts of fraud by the Associated Packing Company and its agents, subsequent to August 14, 1919, and testimony claimed by him to show knowledge, by the appellee bank, of the alleged infirmities in the notes, acquired by the appellee subsequent to August 14, 1919, the date on which it became the owner of the notes and prior to February 16, 1920, the date of payment of the certificate of deposit. Objections by the appellee to this testimony were sustained. Consistent with the court's ruling on appellee's objections to the aforesaid testimony, the court instructed the jury that the giving, by the appellee bank, of the aforesaid negotiable certificate of deposit in exchange for the notes was a payment of value for said notes. The appellant excepted to said instruction.
We will first determine as to whether the court was in error in the giving of said instruction. The appellant raises no question relative to the instructions of the court as to other elements necessary to constitute the appellee a holder in due course. Therefore the primary question in the case is, Did the giving, by the appellee bank, of a negotiable certificate of deposit, in exchange for the notes, constitute a payment of value for said notes? If this question be answered in the affirmative, then the appellant has no meritorious complaint to make as to the instruction, or as to the rulings of the court on the offered testimony.
Under the Statutory Law, section 1850 of the Code 1897 ( ), the appellee had the power to invest its funds in the purchase of the notes in question. There is no contention by the appellant, as was made in Henderson v. Farmers' Savings Bank, 199 Iowa, 496, 202 N. W. 259, that the bank was without power to enter into the transaction for the purchase of the notes, by the giving of a certificate of deposit, nor is there any showing, as there was in the cited case, that the bank had no funds with which to purchase the notes.
[1] It will be observed that the certificate of deposit, which was given in exchange of the notes in suit, was payable in current funds. No question is raised as to the negotiability of said instrument. Said certificate of deposit is negotiable. See Feder v. Elliott, 198 Iowa, 447, 199 N. W. 288, 36 A. L. R. 1353;Henderson v. Farmers' Savings Bank, 199 Iowa, 496, 202 N. W. 259.
[2] A negotiable certificate of deposit is a written acknowledgment by a bank, or banker, of the receipt of a sum of money on deposit, by which the issuing bank obligates itself to pay to the rightful holder of the instrument the sum of money therein named. Kushner v. Abbott, 156 Iowa, 598, 137 N. W. 913.
[3][4] We have held that the giving of a bill of exchange, or a promissory note, in payment of either an existing or contemporaneous debt, in the absence of an agreement that it shall constitute absolute payment, is only conditional payment of the debt, the condition being that the instrument is honored and paid in the usual course of business. See Gower v. Halloway et al., 13 Iowa, 154;Dille v. White, 132 Iowa, 327, 109 N. W. 909, 10 L. R. A. (N. S.) 510. We have held that this same principle applies to payment through the medium of nonnegotiable certificates of deposit. See Huse v. McDaniel, 33 Iowa, 406;Park v. Best, 176 Iowa, 7, 157 N. W. 233;Anthon State Bank v. Bernard, 194 Iowa, 1090, 191 N. W. 283, 288. In Park v. Best, supra, the certificates of deposit were, for the purposes of the case, assumed to be nonnegotiable. In Anthon State Bank v. Bernard, supra, the certificate involved was held to be nonnegotiable. We there said: (The italics are ours.)
[5][6] The rule is well settled that the giving of credit to the seller on his bank account, without a showing that the credit has been absorbed by antecedent indebtedness, or subsequent withdrawals, is not a sufficient showing of consideration to make the bank an innocent holder, and, where the credit has been only partially exhausted, the bank will be protected only pro tanto. See City Deposit Bank of Columbus v. Green et al., 130 Iowa, 384, 106 N. W. 942;McNight v. Parsons, 136 Iowa, 390, 113 N. W. 858, 22 L. R. A. (N. S.) 718, 125 Am. St. Rep. 265, 15 Ann. Cas. 665;Commercial Savings Bank of Washington v. Colthurst, 195 Iowa, 1032, 188 N. W. 844, 191 N. W. 787. This is upon the theory that the purchasing bank has not paid for the note, but merely is the debtor of the seller. This principle applies with equal force to the issuance of a nonnegotiable certificate of deposit, and the giving of credit upon the seller's passbook. However, if the bank assumes a legal obligation to another on the strength of the deposit, it becomes a bona fide holder. See Montrose Savings Bank v. Claussen, 137 Iowa, 73, 114 N. W. 547, 548. We there said: (The italics are ours.)
The pertinent question in the instant case is, Did not the appellee bank, on the strength of the credit...
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